Causal Relationship between Economic Growth and Energy Consumption in the Kingdom of Saudi Arabia

Journal Article

Alqudair, Khalid Hamad . 2012

• Publication Work Type: Article
• Magazine \ Newspaper: The Journal of Energy and Development
• Issue Number: 1&2
• Volume Number: 37
• Pages: 129-142

Publication Abstract

The study examines the long-run equilibrium relationship between energy consumption and economic growth in the Kingdom of Saudi Arabia (1970–2008), using a cointegration technique and the direction of causality relationship for both the long and short run with the vector error correction model (VECM). The cointegration test indicates the existence of a long-run equilibrium relationship between energy consumption and economic growth. The causality test indicates that there is a uni-directional causal relationship that runs from economic growth to energy consumption in the long run and not vice versa. In addition, the causality test indicates the absence of short-run causality between energy consumption and economic growth. Overall, it may be concluded that the results provide support to the conservation hypothesis that entails a positive causality running from economic growth to energy consumption in the long run only.